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Thursday, 26 December 2013

Hong Kong must attract Islamic finance to remain a global market

Peter Forsythe denounces Islamic banking practices as being "the work of global Islamists" ("No place for 'sukuk' bonds in HK market", November 22).

The adjective "Islamic" refers to rules of procedure (as "kosher" refers to Judaic procedures for food and is commonly patronised by Muslims overseas, not only by Jewish people). It is simply advertising to buyers that here is a product which is of a certain nature. The word "halal" would do just as well. The fundamental premise is that money not be allowed to grow by time alone, i.e., by interest. The lender must accept some risk in the venture being financed.

It also makes foreclosure on "pledged" assets somewhat difficult, and is in general more lenient towards the borrower than conventional debt.

Islamic financing tries to, or is at least designed to, link social benefits to purely monetary ambitions, which is hardly a bad thing in the "me-my" culture of today. Let us not denounce it just because it is associated with the current Western hype regarding Islam.

The ethos of Islamic financing is related to the concept of social justice, and is not limited to Islam: the Old Testament categorically forbids interest. Several Catholic popes have historically condemned the practice, as have Plato, Gautama Buddha, Moses, and Thomas Aquinas, among others.

Philosophy aside, on a fully practical note there is obviously a large population of Muslims worldwide, and therefore Islamic financing is seen by some banks and financial institutions as a good market (US$1.3 trillion by some estimates). Hong Kong is now trying to actively tap into this market, and very rightly so, in my opinion.

At 1.62 billion, Muslims are 23 per cent of the world's population, and more than 40 per cent of Southeast Asia's. As a global financial centre, without any doubt Hong Kong must try to attract this large and growing market. You can hardly be a global centre while ignoring a quarter of the world and almost half your largest neighbouring region.

Mr Forsythe is plainly fatuous in connecting Islamic financing to some global religious conspiracy. His labelling of Islamic financing as "inefficient" is hardly credible, especially in light of the "efficiencies" of Wall-Street-type banking practices as seen over the last few years.